Cancellation of a Pending Invoice/Debit Note explained in Detail

In this answer we have provided an in-depth explanation of how the system works internally when an Invoice or Debit Note is cancelled. You can cancel a pending Debit Note from the List View or Details View of an Invoice or Debit Note.

In a true sense, there is really nothing like Cancellation of an Invoice or Debit Note. A transaction once entered cannot ever be deleted. The transaction can only be settled. Therefore even the Cancellation process in a nutshell simply creates a Credit Note of the same amount as the Invoice/Debit Note and settles it with the Invoice/Debit note in question. Lets understand this in greater detail.

Both an Invoice and a Debit Note consist of the following fields:

Invoice/Debit Note Amount: This is the amount of the Invoice or Debit Note.

Pending Amount: This is the amount of payment pending on this Invoice or Debit Note.

The above amounts will be stored in dual currency, incase your Selling Currency is different from your Accounting Currency.

Invoice/Debit Note Cancellation

Lets discuss in detail the process of cancellation of a single partly paid Invoice. This example covers every aspect we need to discuss about Invoice Cancellation. Debit Note Cancellation works in the exact same fashion.

Lets take a dummy Invoice for a Customer A with the following figures -

The Credit Note is added and balanced in a single step by the system. There is no way that the Credit note can be used by the Customer for balancing any other Invoice. The Credit Note is created with the purpose of cancelling the particular chosen Invoice.

When a partially paid Invoice is cancelled in this fashion, the amount of the invoice that is pending will be fully paid this way. And the System will return the amount originally available to the Customer's Debit account.

The transaction would work in exactly the same fashion if you had a Debit Note instead of an Invoice, or a Credit note instead of the Receipt.

Customers can cancel an Invoice from their interface as long as it has an associated Request. In this case both the Invoice and the Associated Request will get cancelled.

A cancelled Invoice will never show a Forex Gain/Loss since the Credit Note is raised at the exact same Conversion rate as the Invoice.

The process of cancelling an Invoice/Debit Note as Bad Debt is exactly the same as a normal cancellation.

The Credit Note is added and balanced in a single step by the system. There is no way that the Credit note can be used by the Customer for balancing any other Invoice/Debit Note. The Credit Note is created with the purpose of cancelling the particular chosen Invoice/Debit Note.

When a partially paid Invoice/Debit Note is cancelled in this fashion, the amount of the Invoice/Debit Note that is pending will be fully paid this way. You will have to manually create a Credit Note if you decide that the amount that was
originally paid should be returned back to the Customer's debit account.

If, however, the entire Invoice was pending (i.e., out of the Invoice amount of USD 100 if the complete USD 100 was pending), then the Credit Note that would be created would be of the entire USD 100.

The transaction would work in exactly the same fashion if you had a Debit Note instead of an Invoice, or a Credit note instead of the Receipt.

Customers can cancel an Invoice from their interface as long as it has an associated Request. In this case both the Invoice and the Associated Request will get cancelled.

A cancelled Invoice will never show a Forex Gain/Loss since the Credit Note is raised at the exact same Conversion rate as the Invoice.